Iconic businessman Carl Icahn is clamouring to shake-up beleaguered Chesapeake Energy Corporation – and his shareholder activism could pose a ripple effect on Global Infrastructure Partners (GIP).
Icahn in a Monday regulatory filing said he intended to engage Chesapeake about the possible sale of Chesapeake Midstream Partners, its pipeline business and a vaunted GIP portfolio company. The 76-year-old financier questioned a previously stated plan by Chesapeake to sell Chesapeake Midstream as part of a push to raise $20.5 billion by 2013.
Billionaire Icahn, a 7.6 percent owner of Chesapeake, has helped pressure the Oklahoma-based company to replace half its board, earning himself board membership in the process.
His campaign to revamp Chesapeake followed the revelation that co-founder Aubrey McClendon used his position as chief executive to conduct personal business. Chesapeake has also been dogged by poor performance amid a 10-year low in the price of gas.
Ten-billion-dollar infrastructure fund manager GIP, which recently assumed ownership of Edinburgh Airport, is half-owner of Chesapeake Midstream, a cash generating master limited partnership, or MLP, and a leading natural gas gatherer and processor.
GIP in 2009 partnered with Chesapeake Energy to form Chesapeake Midstream Partners. In 2010, the company embarked on a widely anticipated and successful initial public offering (IPO).
The company, operated as a self-contained unit apart from Chesapeake Energy, has assembled a 4,000-mile pipeline system – with a significant presence in Barnett Shale, Haynesville Shale and Marcellus Shale – capable of gathering a reported 2.7 billion cubic feet of natural gas a day.
Today, Chesapeake Midstream is trading for $23.99 a share on the New York Stock Exchange – its value has fallen 18 percent in 2012 in part due to parent company Chesapeake Energy.
Despite its recent slide, the stock has remained in favour with Wall Street, recording $52.4 million in net income in the first quarter, up from $13.6 million or 35 percent from a year prior.
Its relationship with GIP, meanwhile, has been positive: Chesapeake Mainstream chief executive Mike Stice in May credited the fund manager with helping instil fiscal discipline in his company.
In February, GIP raised $300 million in a secondary market offering of Chesapeake Midstream, crafting a 9.25 million unit auction that priced the pipeline outfit at $28.70 apiece.